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Thursday, 6 September 2012

FSA proposals on wine investments etc. miss real target

In August the FSA (Financial Services Authority) issued a consultation paper how how Unregulated collective investment schemes
(UCIS) are promoted and sold with a view to tightening up procedures and providing more protection to consumers by limiting their promotion to sophisticated and wealthy investors.

We have seen a significant increase in
sales of UCIS to retail consumers and are aware of a number of risks in this
market. We highlighted our concerns in our Retail Conduct Risk Outlooks in 2011 and 2012.

CP12/19 - Restrictions on the retail
distribution of UCIS and close substitutes

We have published a consultation paper
proposing rule changes aimed at improving retail consumer outcomes by limiting
the promotion of UCIS and close substitutes, and ensuring that they are
recognised as specialised products unsuitable for general promotion in the UK
retail market. As providing financial advice generally includes making a
financial promotion, by limiting the promotion of UCIS we aim to limit the
number of retail clients being wrongly advised to invest in UCIS.

Wine is mentioned in the consultation paper as one of the areas that have concerned the FSA: 'Our work has
identified situations where members of the general public have been invited to
invest in pooled investments based on the performance of unusual assets such as
traded life policy investments (TLPIs), fine wines, crops and timber.'

Unfortunately, although in a Decanter news story on the FSA proposals, Chris Hamilton is quoted: 'FSA spokesman
Chris Hamilton told Decanter.com there were numerous examples of
unsuitable wine investments being sold, and pointed to an investigation earlier
this year which estimated fine wine
investors had lost £100m over four years by entrusting their
savings to failed wine companies' the FSA proposals miss what ought to be their target completely.

The FSA proposals cover wine funds, which are collective investments.I cannot remember the last time I had a complaint involving a wine fund. They do not cover the widespread miselling of individual cases to individual investors as investments. The £100 million loss quoted by Hamilton was suffered by investors buying individual cases as an 'investment'. Even though they are clearly promoted as investments, these transactions are outside the remit of the FSA. So anyone can set up a wine investment company and make all sorts of far fetched and outlandish claims about wine investment returns often based on out of date statistics and the FSA can say nothing.

The only possible exception to this might be the selling of en primeur. which might be deemed as a 'collective investment' as an individual's wine cannot be identified until it has been bottled.

In the meantime more and more 'wine investment' companies disappear with investors' hard earned savings. Those investors are now likely to endure a long-term financial mugging.

Yes Jim, to a point I agree with you.What worries me is this ridiculous self regulation idea that Peter Shakeshaft at Vin-x and others are shouting about. This "organisation" is an irrelevence, which seems to have been set up purely to publicise the companies involved without providing the investor with any safeguards. These companies will all still be cold calling, they will all be hassling people,they will still be doing the same old thing - the only difference is that they will all have a bogus accreditation which means nothing but which will probably fool the investor into thinking they're dealing with proper people. When the founder's - Peter Shakeshaft - dubious past is taken into account, how on earth can this man speak about any form of regulation let alone self regulation?

Unfortunately it is impossible to know what the proposals are. Peter Shakeshaft said he would send me a copy of the proposals in late February/early March 2012. To date I have received nothing.

I have already posted that any wine investment regulation has to be independent of any companies involved both in drawing it up and in its management. Given the history of Wills & Co I have strong doubts that it will be seen as credible and equally doubt that it will enjoy the confidence of either many in the fine wine trade or amongst potential investors.

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